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10/21/2002:
Tom
Friedman, the New York Times columnist, once wrote
that the September 12 agenda of the Bush
administration has swept away its September 10 agenda.
The 9/11 attack has caused it. While there are some
rational justifications for the Bush administration to
do that, will Megawati, in the case of Indonesia,
follow the same path? This is an important question
which demands a serious answer.
No question that the perpetrator of the
terror in Bali has to be brought to justice and
terrorism has to be combated confidently. But the
Megawati government must not neglect another critical
agenda – the October 11 agenda- that is economic
revival. In fact, an effort to combat terrorism and an
initiative to revive the economy must go hand in hand.
Undoubtedly, the terror in Bali will
affect the economy. Already
one
hotel in Bali has received 400-450 room cancellations
since the bombings. As the governor of Bali, Edi
Bharata said, "If there are no extraordinary measures
to restore international confidence, tourism
businesses here will totally collapse." Tourism is
vital not only to the Bali’s economy but also to the
country’s economy as it contributes to 5 percent of
the country's annual output and employs about 8
million of the country’s 92 million workforce.
But
the terror also could potentially hurt foreign and
domestic direct investments. Even prior to the
bombings, the approved domestic and foreign investment
projects have shown a sharp decline (See the Graph).
The graph clearly indicates that the total approved
domestic investment (DDI) and foreign investment (FDI)
projects have steadily decreased.
Source: Bank of
Indonesia
In the first semester of
2002, the total DDI has gone south to 10.9 billion
rupiah from 14.7 billion rupiah in 2001 or a decrease
of 26%. While FDI decreased by 41% from 4.3 billion to
2.5 billion rupiah during the same period. Although
foreign investors are more sensitive to the domestic
instability than domestic investors, it is domestic
investors that play key role in investment projects.
During the last four years, the total approved DDI is
approximately four times that that of the approved FDI.
These two important observations are enough to suggest
that urgent and strategic measures in order to
stimulate and restore the confidence of domestic
investors are needed.
The
economy needs an investment crusade for its revival.
All the major issues confronting the country such as
unemployment and poverty would be automatically
addressed to a large extent if investment is
accelerated. Every effort must be used to make the
local investors start investing. Only after the local
investment starts, foreign investors would follow.
Strategic and concrete measures have to be
undertaken, on both long and short-term basis, by the
government in collaboration, support, assistance and
consultation with all the relevant elements in the
country from private sector, mass organizations to
political parties.
President Megawati should consider renaming and
revitalizing BKPM (Investment Coordinating Agency).
Instead of “coordinating”, its name should be changed
to “attracting” and its top official must be a figure
who can wage a war to break the investment deadlock in
the country and inspire confidence in the investors
through imaginative and innovative approach and
policies. A highly committed and dynamic official is
the need of the hour. The individual must be a
dedicated professional, not an opportunist politician,
who can think and work wholeheartedly for the nation.
The
investment initiative then is combined with a
strategic revival plan that has yet to be formulated.
For more than a year, the Megawati government has not
been able to produce a clear strategic plan to revive
the economy. The government officials are fond of
expressing optimism about the economic growth and
inflation rates forecast. But those macro indicators
are secondary after the need for direction. People
need direction. Potential and “sleeping” investors
need to be convinced by a clear direction where the
economy will be heading. The Cabinet should not work
only to handle one problem after another and lose its
sight for medium and long-term goals. A temporary
sacrifice is more valuable than a long painful
uncertainty. Therefore, the economic plan should
answer questions such as: What do we have to achieve
five, ten and twenty years from now?
On a
wider front, the government must make people
investment-oriented by establishing a national
investment account, for instance. Suppose we had
around 20 million middle class workers. If each of
those were to invest 10 thousand rupiah in the
national investment account, the government would
collect 200 billion rupiah which can be used to
promote small businesses and create new jobs. The
problem is we need to have clean, reliable and capable
officials to manage the campaign. Otherwise, costs
can exceed benefits.
Indonesians living abroad could also be potential
investors and various strategies and programs could be
done to attract them. However, any campaign officials
must be clearly scrutinized before authorized to do
the job. The recent participation of Indonesia in a
festival in Den Haag showed that consideration on cost
and benefit analysis is often ignored.
The
investment campaign is not without certain
requirements. It requires political objective to be
locked in the closet if any of political decisions
conflict with this supreme objective of breaking the
investment shackles. The advantage of announcing
investment initiative strategies publicly is to place
the party which might try to impede it on a shaky
ground for the next election. People need economic
security and are desperately striving for a better
life. Luckily, they do know that investment is one of
the panaceas for realizing it. This is enough to
convince the government that any strategic and
concrete investment initiatives will likely be
supported by majority of economic and political
elements in the country.
The
revival of the economy through investment is not going
to be easy, but whatever investment campaign
initiatives that government may announce and
implement, it is an objective worth pursuing with
relentless devotion on top priority and urgent basis.
This tasks needs to be undertaken like a dedicated and
vigorous operation. Economic turbulence, dramatic
political change and all that follows are
extraordinary episodes that need to be met by creative
and extraordinary measures. People expect that the
president and her Cabinet are able to do extraordinary
jobs. But expectation has a time limit. Without
immediate strong investment campaign, it is less
likely that the people’s expectation will materialize.
And the
effort to combat terrorism could
produce a backfire.
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